I'm an analyst of technology, the global economy, and far more complex phenomena – my four young children. Through my firm Entropy Economics LLC, I research the growth of the Internet and the broadband networks and applications that drive it. I also study innovation around the world, especially in China, and frequently write about all these topics on the editorial page of The Wall Street Journal. For eight years I advised technology investors as executive editor of the Gilder Technology Report and after that was a senior fellow at the Progress & Freedom Foundation. I'm a scholar at the U.S. Chamber Foundation, a visiting fellow at the American Enterprise Institute's Center for Internet, Communications, and Technology Policy, and am also a trustee and vice-chair of the Indiana Public Retirement System (INPRS). Find me on Twitter @JBSay and @entropyecon.

The Real 'Slow Lane' Threat To The Internet

There is a subversive plan to slow the Internet, and it must be stopped. The new plan, now being contemplated by the Federal Communications Commission, could alter the Internet forever. It could slow speeds, limit the content and applications consumers can access, and create a two-tier system that favors some companies over others. The plan even has a code name: it’s called “Title II.”

FCCFCC Chairman Tom Wheeler’s proposal to implement “net neutrality” is the touchpoint for this controversy. After serial losses in federal court, where numerous judges admonished FCC overreach, Wheeler is now trying to thread the regulatory needle. He wants to use the tenuous authority the court has granted him — the legitimacy of which many still challenge — to impose yet a third version of net neutrality rules. But because Wheeler’s proposal leaves some room for network experimentation, the net neutrality fundamentalists have cried foul. They say Wheeler sold out to private industry. They say his proposal could result in “fast lanes” and “slow lanes” on the Internet. They insist Wheeler instead reclassify the Internet as a public utility.

Internet map plain 1024 (Photo credit: Wikipedia)

The “slow lane” critique could not be more backwards. For many decades we regulated the telephone network as a public utility, with predictable results: it strangled competition, limited innovation in devices and services, and elevated political lobbying to the detriment of investment and consumer welfare. Then the Internet came along, we broke out of this public utility framework, and innovation exploded. We moved from a single slow lane to multitudinous fast lanes, from a sleepy-time utility world to an Internet-time digital economy.

The Telecom Act of 1996 was clear: the Internet should be “unfettered by Federal or State regulation.” In the most recent Verizon case, the court explicitly said the FCC cannot treat the Internet (which, since the Clinton Administration, it is has classified as an unregulated “information” network) as a heavily regulated, Title II, common carrier, “telecommunications” network. The solution according to the fundamentalists is simple: reclassify the Internet, or at least parts of it, as a Title II telecom network. Voilà. Now we can regulate it as an old style public utility.

The stated goal of a Title II reclassification is to circumscribe the behavior of broadband service providers — ComcastComcast, AT&TAT&T, and Verizon, for example. The practical effect of such a move, however, could hardly be more devastating for the Internet. Title II reclassification would be an omni-regulatory power grab of historic consequence. Once unleashed, it would reach out and touch every node of our sprawling global networks, including Silicon Valley content firms, app makers, and cloud companies.

Title II regulates prices. It requires government permission to supply new products and services, or to terminate old products and services. It often requires approval for marketing campaigns or new technologies. It would open the door to regulation of the Internet by the 51 state public utility commissions and by every nation around the globe — imagine the fragmented confusion. Title II would blow up the existing technologies, business models, and voluntary interconnection agreements that have resulted in so much Internet success. More ominously, it would dramatically slow the pace of advance in the technologies, business models, and network and service innovations of the future.

Because Title II traditional applied to the transmission of information, as opposed to its storage or processing, any bit-moving function could be exposed to Title II’s heavy hand. Most big Web firms, many of whom signed a letter asking for stronger regulations (though, notably, not explicitly asking for Title II), perform lots of transmission. GoogleGoogle has its own global fiber and content delivery networks. NetflixNetflix has its own CDN. Same for Amazon and Microsoft and Facebook. And what about Xboxes and Kindles? These products contain transmission components (Xbox Live and WhisperSync). All these firms and products could be swallowed by Title II’s omnivorous reach.

The “transmission” distinction is itself thoroughly obsolete, which is why all these networks and products should be considered information services. Even within a microchip or a data center, data is transmitted. It is also stored and processed. The three fundamental acts we perform on information cannot meaningfully be distinguished — especially not by three commissioners and committees of lawyers.

For all of Title II’s potential for catastrophic harm, it offers no upside, even for its most hearty proponents. The bête noire of the neutrality fundamentalists is so called “paid priority,” where some bits (like high resolution videos that require fast and reliable delivery) are prioritized over mundane applications (like data backups or routine emails, where it doesn’t matter if the bits arrive now or a few milliseconds later). But common carrier regulation of phones or trains (of which Title II is an example) explicitly allows service discrimination (paid priority) as long as all similarly situated customers get the same offer.

Title II thus doesn’t even solve the supposed problem — but would cause new problems of its own. Far from a burden on small Web start-ups, paid priority could be an inexpensive and crucial tool. Behemoths like Google, Amazon, and Netflix have built out vast networks and content delivery systems of their own — to speed the delivery of their own bits. But small firms focusing on a first time product don’t have the wherewithal to match that physical infrastructure. They often use CDNs to deliver static content. But for other real-time services like gaming, or education, or health care, they may prefer to pay a network provider to move their bits and provide their customers with a first-rate experience. Prohibiting paid priority and other network services could thus harm start-ups and reinforce the big Web firms’ position of dominance.

Because Title II’s backers know all this by now, it is difficult to take their proposal as anything more than a play for government control of the Internet. The existing hands-off regime has been a boon for Web firms and broadband providers, for software and hardware companies, for cloud and carrier, for content and conduit. If the FCC really thinks we need extra rules to formally codify the open Internet principles that all firms across the ecosystem already support, we should rely on Section 706, which at least emphasizes investment and growth.

Title II regulation was the slow lane. Thank goodness we’ve left it in our dust.

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Funny how both sides in the debate would like to cover up and/or revise the past.

The net neutrality side would like us to believe the internet miraculously sprang out of govt labs (or Al Gore’s bathroom). At the same time, the edge access providers would like us to believe that govt mandated interconnect policies had nothing to do with the progress and innovation of the past 30 years.

The fact is that both are wrong and both are tied to the same set of circumstances that brought about the TMT/ICT miracles of the US economy over the past 30 years. These circumstances revolve around open or equal access policies at various layers and boundary points of the informational stack. We can point to cable, voice, data, and wireless as all having benefited from the FCC’s actions, with both intended and unintended consequences. These include A/B/PCS interconnect, Part 15, Equal Access, Pole Attachments, Must Carry, numerous Number Portability measures, Computer II, etc….

Had it not been for Bill McGowan and the FCC of the early to mid 1990s, this past 30 year future would not have been delivered to us by the information monopolies of the 1910s-1970s.

So far the current system has only be a boondoggle for us out in flyby country. I pay higher rates because of taxes and get slower speeds while the taxes are use to subsidize service to the “poor” in the big cities where the politicians and other power players also get “free” (taxpayer funded) unlimited always on high speed WiFi.

BUT, out here in fly by country I will never see a wire at my door with “high speed data” in it. I am completely dependent on some kind of wireless service. BUT the wireless ISP’s are not required to extend the coverage or improve the speed of the data available even as they are jockeying to consolidate (Sprint + T-Mobile and AT&T + Dish) so they can better implement the wired cable business plan of “bundling” garbage (sports, shopping, religious, soft porn, and music) into the plan to drive up the price.

Title II designation does NOT have to include government setting of the speed, the price, or the data caps but it is the ONLY way that government can force the wireless ISP’s to actually use the radio spectrum to extend high speed coverage outside the high population areas where my taxes are currently being sent to subsidize the poor.

Here is the plan and it could even be applied to the wired ISP’s.

What really must be understood is that Net Neutrality only matters IF someone can actually connect to the internet.

1. Right now the wireless ISP’s have NO incentive to actually use any new spectrum they buy to improve service (either speed or coverage) outside the high population density areas. 2. The high bandwidth users suck the life out of the connections that are available without paying for the privilege of using 90% of the small amount of bandwidth that is available.

Before allowing AN ISP to charge for higher speed, they should be required to show that:

1. They offer the same MINIMUM ADVERTISED speed to ALL (not just those in high population density places) of their customers in ALL (not just high population density places) locations ALL of the time for the same price. (GOVERNMENT SHOULD NOT DICTATE THE PRICE, SPEED or DATA CAP!! This would retain the current incentive for competitors to provide ever increasing speeds and data allotments at ever lower prices.) 2. Creating the fast lane won’t slow down the other paying customers. (DUHH!! Anything else is clearly “discriminatory”.) 3. The wireless ISP’s must be required to use any new radio spectrum they buy EVERY PLACE THEY OWN IT or lose it EVERYPLACE without a refund. (Combined with #1 this is the HAMMER needed to get the wireless ISP’s to build out their systems.)

This gets us competition, investment and more access to higher speeds for more people. After all, Net Neutrality is only important IF someone can ACTUALLY connect to the net. Under the current system, the best I will ever get is the dirt road out in fly by country where I am at today. The place where not only is service slow (rarely above 1.7 MBPS), it is inconsistent (generally only available within 3 miles of a city or major road) and about 20% of the time non-existent. So for me, under Title II regulation, I could contract with an ISP for some MINIMUM speed, and be guaranteed to ALWAYS get at least that minimum speed,, then I will come out WAY ahead of where I am today because, right now I cannot do that.

I feel for you, but I’m not aware of any “Free” high speed access you mention. I think the “fly by country” where you live is never a good bet to get these providers to extend their service. They have little incentive to do so and see it as a high cost venture. Title II may NOT help you get better or faster service, but without it, your costs, as well as all other Internet consumers, will most certainly rise. It’s not hard to see. If these phone and cable providers and charge fees (EXTORT) to content providers just for the privilege of reaching the ISP’s customers, that cost has to go somewhere. If you’re not a Netflix customer, don’t worry. Amazon, Google, Microsoft, Apple, and virtually every other content company out there will have a target on their backs. And will be targets by EVERY ISP out there, not just the big ones (e.g. Comcast, Verizon, AT&T, Time Warner), but ALL ISPs. You will not be able to avoid it!

Forgot to mention that Bret will do a “Call Out” – their term for someone who dares to disagree with their commentary!

Just so you know, Title II does NOT mean that the FCC will now be in the business to set Internet pricing. But what it WOULD do is provide a legal framework around which their 2010 Open Internet rules could be re-applied, and would stand up to a court challenge. Both Comcast and Verizon have sued the FCC to overturn these principles (2005) and then rules (2010) as they do NOT want to abide by simple rules to run their business which are in the best interests of the Internet community.

No, can’t have that. They need to monetize their networks in any way they can. Get ready to bend over, Internet community.

But to re-classify as Title II would give the FCC the authority to re-apply the SAME 2010 Open Internet rules that Verizon just had invalided this last January. Those same rules have been governing the Internet for nearly the last 10 years. And the sky did not fall down!

And before that, there was at least some semblance of competition which required phone companies to allow other DSL providers to share their networks (when they were previously classified as Title II). But when that classification was changed to an “Information Service” rather than a “Telecommunication Service”, that all changed. That’s when these phone and cable companies began their nefarious challenges to what they espouse as “Open Internet” commitment (when you’re not looking, we’re going to try and bend you over, then reverse the rules).

This latest FCC action is NOT ENOUGH. We need Title II or we’ll be in no-man’s land where further court action will become the norm. New legal challenges will begin to shape and make clear the “commercial reasonableness” that the FCC is authorized to enforce. And don’t expect much. The large phone and cable companies will begin to assert that the FCC’s rules are not enforceable. And soon, whatever the companies wish to do, they will be authorized to do so. This will allow them to set policies such that they get the most return on investment (e.g. FAST lanes by charging Content companies). And any FAST lane WILL PRODUCE a SLOW lane. Regardless of what they say, you CANNOT speed up some content without a corresponding SLOW down of all other content. It’s not possible.

To say that it is possible implies that there is enough bandwidth to not impact the non-prioritized content. If that’s the case, why would anyone buy prioritized content? They will not, which means these companies cannot make more money. So expect “artificial scarcity” within their environments. They can’t make money without it.

I’m no fan of Net Neutrality, but the idea that Title II regulation would “open the door” to foreign government regulation of the Internet is ludicrous.

Those governments can regulate the Internet within their borders now. It’s not like they need the FCC to authorize Title II regulation within the U.S. to give them permission to regulate the Internet within their own borders.

Such claims are the worst kind of hyperbole and not worthy of your readers.

Thanks for your comment. I think the potential for international meddling is real. A Title II designation of the U.S. Internet would signal to the ITU and foreign governments that we intend to regulate the Net like the old phone network — where international calling was governed by cross-border access charges and lots of rules. Because the U.S. sends far more data to other nations, it could open us up to huge fees charged from abroad. We don’t want the ITU bureaucracy governing an Internet with strict national boundaries.

I would tend to be a bit more sympathetic but for the fact that the telecos eagerly use Title II to BENEFIT themselves when they see fit. Why you may ask: ” The reasoning here is simple to understand. For all the talk of why they hate Title II, Verizon (and AT&T) know that Title II gives them tremendous subsidies in the form of access and rights of way. Basically, the only way they can get the right to rip up the ground or access existing conduits and electrical poles to lay all that fiber — is to be classified as a common carrier under Title II. So a bunch of Verizon’s applications concerning its FiOS service are entirely about why they should be classified as Title II.

But here’s the little dance move they pull. They claim that this infrastructure must be considered Title II, in order to get those subsidies, tax breaks and rights of way. And they insist that it’s proper to classify it as Title II because it offers voice service over those lines. But, at the very same time, they claim that all other services that they provide, must be classified under Title I. ” Masnick

I understand, but the era of other countries following the U.S. lead is over, it was over long ago. They don’t need our permission to regulate the Internet as telecom. I doubt if South America or the E.U. is waiting for the U.S. to act before they do.

Can we please, PLEASE do away with the myth that there is competition in the US broadband market? Most users have a choice of exactly two broadband providers; their cable company and their phone company. Sure, they can go to a DSL company, but they’ll still need a landline and will get sub-standard speeds. And that’s IF the phone company hasn’t killed landline service to their area, like both AT&T and Verizon want to do to many customers.

This is because exclusive franchise agreements guarantee that only one cable company can serve any particular area. I have 100mbps service with Cablevision. They recently increased my rates and if I eliminate any of my three services in an attempt to save save, the internet portion of my bill alone will double. It will go from $60 now to $120! If I want fast internet service, what’s my alternative? AT&T’s U-Verse at 24mbps? Not that their prices are any cheaper.

Look at the rash of state bills designed to prevent cities from creating their own fiber network because it would be “unfair” competition.

Maybe Google Fiber will show up here in another 10-20 years…

Cable companies in the US have a broadband monopoly, there is no competition.

The FCC should use Title II of the Telecommunications Act and reclassify internet service providers as utilities so that they are regulated like telephone service is. Internet service providers should be subject to common carrier laws. Companies should not be allowed to discriminate against traffic by slowing it beyond what is necessary to keep a network running.

FCC chairman and former cable lobbyist Tom Wheeler should be ashamed of himself for pretending to represent the interests of the American people while trying to give handouts to Verizon and Comcast. His myopic attempt to end net neutrality will create unfair barriers to entry in a market dominated by corporate monopolies and cripple the ability of our country’s businesses to compete in the global marketplace.

Your flat wrong Brett. I have been running internet networks and businesses since 1995. If we allow this to go forward it will end up killing small startups that have no way to pay the huge kickbacks to these giant monopolies just so customers can access them, while the larger content players can squeeze out any and all newcomers. And customers have no alternative to choose from as most cities only allow a single cable company to operate. Been there done that with the level 3/Cogent data wars etc.

Cable TV is dying, they want to move the model of both content providers and consumers paying them at both ends that they have enjoyed in the cable TV market to encompass the internet. As well telephone lines are dying as everything switches to voip transmitted over, you guessed it, cable TV monopolies.

Why else would companies like comcast spend as much lobbying as the military industrial complex does, to the point of buying their way to have the head of their lobbying arm appointed to FCC chair? It isn’t for the sake of consumers, or content providers. It is to grab a monopolistic death grip on the internet where all players must pay them or else. They need to be common carriers that anyone can sell ISP service over their wire. This IS where we will end up, better now than after a few years of pain.

Internet providers in the US will continue to dominate over consumers by proving low quality service at exuberant prices until the US will regulate its telecom industry as harshly as the UK and Israel have done.

For example, in Israel I can get 100mbps broadband for as low as $40, because of regulations allowing ISPs with no “last mile” infrastructure to lease bandwidth from infrastructure providers, which are forced to offer this service under commercially reasonable terms. The ongoing FTTH deployment offers up to 1GB symetrical for as low as $90 – because the infrastructure provider is not an ISP and is required to let ISPs compete with each other using their infrastructure.

Another thing that people might be interested to know, is that we are missing some important disclosure here:

Bret Swanson, the author of the article, is associated with IIA – a pseudo-consumer group that is allegedly a front for AT&T lobbying, AT&T being one of the largest ISPs who has the a lot to lose if ISPs are regulated. (source: http://www.sourcewatch.org/index.php?title=Internet_Innovation_Alliance )

I think it is important for people who are financed by large corporations to disclose this when they are writing in the media in favor of such corporations.

Thanks for pointing that out. Any time I read an article like Bret’s, I ALWAYS wonder who’s paying that person’s salary. And if it’s the phone and/or cable companies, why not DISCLOSE this simple fact?

People like Bret want some legitimacy, and by hiding their relationship to the ISP industry, they think they can forward their agenda. And all the while those who are not aware of this relationship, think Bret’s “opinion” is unbiased!

If you want to sell us a load of goods, DISCLOSE your relationships! Especially when one’s “opinion” flies in the face of COMMON SENSE!

We now know the phone and cable companies have put together “lobbying” groups to make the *appearance* that they have the *same* opinions as the phone and cable industries. It appears we found on in Bret.